Delhi High Court Affirms Tribunal’s Decision, stating that the Arbitral Tribunal’s discretion was exercised appropriately and not arbitrarily.
Delhi High Court Affirms Tribunal’s Decision, stating that the Arbitral Tribunal’s discretion was exercised appropriately and not arbitrarily.
Case title: ROADWAY SOLUTIONS INDIA INFRA LIMITED VS NATIONAL HIGHWAY AUTHORITY OF INDIA
Case no.: ARB. A. (COMM.) 18/2024 & I.A. 7167/2024, I.A. 7168/2024, I.A. 7169/2024
Dated on: 28th May 2024
Quorum: Hon’ble. MR JUSTICE ANUP JAIRAM BHAMBHANI
FACTS OF THE CASE
The present appeal filed under section 37(2)(b) of the Arbitration & Conciliation Act 1996 (“A&C Act‟), the appellant (claimant in the arbitral proceedings) impugns order dated 27.03.2024 made by a 03-Member Arbitral Tribunal, on an application under section 17 of the A&C Act seeking certain interim reliefs. As perusal of the impugned order shows that the learned Tribunal has dealt with the matter in considerable detail and has addressed all three principal prayers made in the application individually. The learned Tribunal has dealt with each of the reliefs sought in the section 17 application in the following way Insofar as the relief of injuncting the respondent from proceeding with the fresh RFPs and NITs is concerned, the learned Tribunal has held that that relief had become infructuous since the respondent has already gone ahead and awarded the contract to a third-party, and the validity of termination of the appellants contract is required to be decided in the main proceedings. The learned Tribunal has then proceeded to decide the interim prayer against threat of the appellant being disqualified from participating in future RFPs/NITs. In this behalf, suffice it to say, the learned Tribunal has held in favour of the appellant, and after a fairly detailed discussion, has come to the conclusion that the appellant satisfies all three tests, viz. of making-out a prima-facie case, of satisfying the learned Tribunal that balance of convenience lies in the appellants favour, and also that irreparable loss and injury would be suffered by the appellant as a consequence. Accordingly, the learned Tribunal has held in favour of the appellant, granting a limited interim protective order as to the appellants entitlement to participate in future tenders that may be issued by the respondent. Thereafter, the learned Tribunal goes-on to consider the statements filed by each of the parties, in relation to the value of the work completed by the appellant, as indicated in certain Interim Payment Certificates. The learned Tribunal observes that there is huge variation between the amount claimed by the appellant to be due and the amount that the respondent says is payable.
ISSUES
- Whether the Arbitral Tribunal’s order dated 27.03.2024, concerning the application for interim relief under section 17 of the A&C Act, warrants interference by the court under the limited scope of section 37 of the A&C Act.
LEGAL PROVISIONS
Arbitration and Conciliation Act, 1996
Section 17: This section empowers an Arbitral Tribunal to order interim measures of protection as it deems necessary at the request of a party. This includes ordering a party to provide a deposit for the costs of arbitration or granting interim relief similar to those that courts can grant.
Section 37(2)(b): This section provides for appeals against orders of an Arbitral Tribunal granting or refusing to grant interim measures under Section 17. The scope of judicial intervention under this section is limited to ensure that the Tribunal’s discretion is not unduly interfered with unless it is shown to be arbitrary, capricious, irrational, or perverse.
CONTENTIONS OF THE APPELLANT
Mr. Arvind Nayar, learned senior counsel appearing for the appellant Mr. Arvind Nayar, learned senior counsel appearing for the appellant further argues, that as the record would show, in the proceedings filed for interim relief in this court, both the Co-ordinate Bench as well as the Division Bench, were pleased to hold in favour of the appellant and had restrained encashment of the bank guarantees, which position has now been reversed by the learned Tribunal. Mr. Nayar also points-out that the learned Tribunal has given no reasons for its conclusion, permitting invocation of the bank guarantees. Senior counsel argues that once the learned Tribunal had applied the triple-test and held in favour of the appellant in relation to other reliefs, the relief against invocation of the bank guarantees was in fact, a consequential relief, which ought to have followed.
CONTENTIONS OF THE RESPONDENTS
Mr. Ankur Mittal, learned counsel is present on behalf of the respondent on advance copy; but has not been called-upon to address the court. Upon a careful consideration of the submissions made by Mr. Nayar, this court is of the opinion that the learned Tribunal was in no way bound by the interim orders granted by the Co-ordinate Bench or by the Division Bench of this court in the various proceedings referred to above. In fact, concededly the Division Bench had extended the interim order restraining the invocation of bank guarantees only till the first sitting of the learned Arbitral Tribunal. That order was however continued by the learned Tribunal till the final decision on the section 17 application. In the meantime, the very constitution of the learned Tribunal also came to be changed; during which period also the invocation of the bank guarantees remained stayed. The interim order passed by the Division Bench had therefore long outlived its intent and purpose.
COURT’S ANALYSIS AND JUDGEMENT
As observed above, all three reliefs sought by way of the section 17 application have been considered in detail by the learned Arbitral Tribunal, and after due consideration and reasoning, the learned Tribunal has held that insofar as staying the effect of the termination notice is concerned, that relief has been rendered infructuous, since in the meantime not only did the contract stand terminated, but fresh NITs and RFPs had been issued and a fresh contract had been awarded to a third-party. That being said, the learned Tribunal has observed that the validity of the termination would, of-course, be considered on its merits in the course of the arbitral proceedings. Insofar as the other relief of debarring the appellant from participating in future tenders is concerned, the learned Tribunal has held in favour of the appellant, thereby granting interim protection and assuring the appellants entitlement to participate in future tenders. However, as far as invocation of the bank guarantees is concerned, after giving due consideration to the value of the work claimed to be completed by the appellant; and the respondents version thereon, the learned Tribunal has come to the conclusion that, at the interim stage, there is no basis to injunct invocation of the bank guarantees. The discussion in the impugned order would also show that the appellant had failed to even allege a case of „fraud‟; and had also failed to make-out a case of „special equities‟ in its favour that would warrant restraining invocation of the bank guarantees. It is also needs no detailed articulation, that interference by court under section 37(2)(b) of the A&C Act is warranted only in exceptional circumstances, when the court finds that the use of the discretionary power under section 17 of the A&C Act by an Arbitral Tribunal is palpably arbitrary, capricious, irrational or perverse. This Bench has itself so held in India bulls Housing Finance Ltd. & Anr. vs. Shipra Estate Ltd. and connected matters, while explaining the scope of interference by court under section 37 of the A&C Act. In the circumstances of the present case, this court is of the view that no ground is made-out for interfering with order dated 27.03.2024 passed by the learned Arbitral Tribunal on the application under section 17 of the A&C Act, within the limited ambit and scope of the jurisdiction of this court under section 37 of the A&C Act. The appeal is accordingly dismissed in-limine without however any order as to cost. Pending applications, if any, also disposed-of.
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Judgement Reviewed by – HARIRAGHAVA JP